Republicans Get It Wrong on Americans and Debt

We're in no danger of running out to go on a debt binge -- we're too focused on paying our current loads down.

It seems the Federal Reserve decided today to ignore advice sent its way from Republicans Mitch McConnell, John Boehner, and Eric Cantor. Rather than sit on its hands, the Fed decided to take action (or do the Twist, it would seem). But it's worth still reflecting on one of the misguided ideas the Republicans espoused in their letter to Ben Bernanke.

One of the main concerns listed in their short note was that further action by the Fed could "promote more borrowing by overleveraged consumers." Off the bat, this seems a bit oxymoronic. Why would overleveraged consumers go out and borrow just because the Fed changed policy? We're not so easily suckered into debt as all that.

In fact, consumers are so hell-bent on getting out of debt (or, for some, getting pushed out of it through foreclosures and defaults) that they probably don't have time to notice what the Fed said today. We spent $72 billion more paying down credit card debts than on purchases in 2009 and 2010 -- and that's a trend somewhat unique to the post-recession period. Total outstanding revolving credit card debt fell 4.6 percent during the first half of the year compared to first half of 2010. And only .6 percent of borrowers were 90 or more days late on credit card payments in the second quarter of this year, the lowest that rate has been in 17 years. There's plenty of work ahead, though, when it comes to deleveraging: consumer debt still sits at 90 percent of GDP, as compared to 70 percent in 2000.

We're not too excited about spending more money anyway. While it has seen some slight rises lately, consumer sentiment was at the lowest level since 1980 in August. Consumers were too preoccupied with unemployment, stagnant wages, and the ridiculous display of political infighting during the debt ceiling debate to feel optimistic about where things are heading.

But even if we did want to throw precaution to the wind and start borrowing like crazy, doing that wouldn't be very easy. Credit card interest rates hit a record high this week, reaching an average 14.96 percent APR -- up from 14.94, where it had stood for the previous two weeks. It's the third week-to-week increase in the past month, and the fifth time in 2011 that rates have hit record levels. Credit card companies aren't exactly welcoming customers in with good deals on more debt.

So Republicans, you can relax: Americans are far from likely to go on huge debt binge after the Fed's announcement today. We'd love to be rid of the debt we have. We're just having a damn hard time doing that.